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December 18, 2018 | Posted in:

6 Last-Second Money-Saving Tax Moves

As 2018 winds down, there is still time to reduce your potential tax obligation and avoid penalties. Here are a few ideas to make your 2018 tax return less of a burden on your wallet:

1. Take advantage of the annual gift exclusion.

For 2018, you may provide gifts up to $15,000 to as many individuals as you wish without tax consequences. This could include gifts of cash or property, including investments.

2. Fund tax-deferred retirement accounts.

An easy way to reduce your taxable income is to fully fund retirement accounts that have tax-deferred status. The most common are 401(k)s, 403(b)s and various IRAs (traditional, SEP and SIMPLE). Contributions to traditional IRAs need to happen by April 15, 2019.

3. Make effective use of capital losses.

Up to $3,000 in capital losses can be claimed each year to reduce your ordinary income. This loss limitation is calculated after netting all your capital losses against any capital gains.

4. Delay receipt of income or accelerate expenses.

If you are a small business owner, you might want to delay invoicing until after the new year to reduce your 2018 income. Alternatively, you may want to pay business expenses due in January before the end of the year.

5. Take required payouts.

If you’re age 70 ½ or older, your required minimum distributions need to be completed by December 31st. The fines are extremely hefty if you don’t – 50 percent of the amount you should have withdrawn.

6. Tap PA Educational Tax Credits.

If you pay Pennsylvania state income taxes, you may be able to convert taxes into charitable contributions that provide scholarships to low-income families. It’s through the Pennsylvania Educational Improvement Tax Credit and Opportunity Scholarship Tax Credit programs. Participation generates a PA tax credit, providing an opportunity to convert a potentially non-deductible state tax payment into a deductible charitable contribution for federal tax purposes.

 

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